CREDIT INVESTIGATION

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CREDIT INVESTIGATION
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What is credit investigation?

• Gathering of information about the business its
  owner.
• Data to be gathered can be categorized into
  four (4) groups commonly known as the
• 4 Cs of credit
• character
• capital
• capacity
• collateral

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Character- Sino Ka

• Ascertain the complete accurate name of the
  business owner.
• Inherent traits personal character of
  the
• customer.
• Personality, moral values, family, social
  business relationship of the customer
  should be scrutinized to determine whether he
  has the requisite to enter into a credit
  transaction.
• Acceptance of responsibilities
  towards financial obligation or willingness to
  pay.

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Capital Magkano ka ba -

• Properties which the customer owns that are
• in his name whether movable or immovable
• land
• improvements
• property rights
• shares of stocks
• vehicles

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Capacity Kaya mo ba

• Ability of the customer to earn enough to pay
  the credit obtained or to be obtained when
  it is due.
• Income or business profitability.

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Collateral Ano pang iba

• Properties or assets owned by the customer or
  by another person or entity that may be given
  as security for the credit obtained or
  to be obtained.
• Acceptable security or collateral
• cash bond
• surety bond
• real estate property
• domestic letter of credit (irrevocable)

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Why do you conduct credit investigation?

• To gather as much information as possible on
• a best effort basis to help in the following
• Determine the credit worthiness of the
  
• customer.
• Reasonably evaluate the amount of credit
• line term to be granted to the customer
• -term of payment -clean line -secured
  line
• To minimize control credit risk exposure.

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Type of Credit Investigation

• Disclose
• known to the customer
• with customer interview
• inquiring party is disclosed
• Discreet
• not known to the customer
• no customer interview
• inquiring party is not disclosed
  

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Manner of Conducting Credit Investigation

• customer interview
• verification of information with
• government agencies
• bank checking
• trade checking
• court checking
• preparation of report

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Customer Interview-Coverage

• Owner or authorized representative or
  resource person who has knowledge of the
  business operation.
• Personal background of owner/s
• Business history
• date started
• initial capitalization/present
  capitalization
• source

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Customer Interview-Coverage

• Business history
• nature of business
• products produced/sold
• former office, store, plant, warehouse, farm
• expansions made
• Business operation (present)
• facilities logistical support
• -office, store, plant, warehouse, farm
• -owner location of facilities

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Customer Interview-Coverage

• Business operation (present)
• facilities logistical support
• -machineries equipment acquisition
• cost
• -vehicles - delivery transportation
• automobile
• production
• -products carried
• -average production volume per month

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Customer Interview-Coverage

• Business operation (present)
• production
• -average monthly cost of production
• -average monthly operational expense
• selling strategy
• -market coverage
• -how are products marketed
• -mode of distribution retail/wholesale

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Customer Interview-Coverage

• Business operation (present)
• selling strategy
• -selling terms
• -average sales volume per month
• -average monthly sale (peso)
• -comparable competitors
• manpower complement
• -total number of employees
• -unionized or not

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Customer Interview-Coverage

• Other information
• property holdings location
• bank references dealing (other than those
• disclosed in the credit application form
• suppliers (other than those disclosed in
  the
• credit application form)
• Other Business(es)

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Verification with Govt. Agencies

• Registration with the SEC
• Registration of business name with the DTI for
• single proprietorship
• Mayors permit with the municipals
• Business Licensing Office
• Property checking
• Assessors Office
• Registry of Deeds - if checking with the
• Assessors Office yielded positive result

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Checking with Banks

• Deposit account
• type of account - savings or current
• client since when
• average daily balance
• present balance
• record of bounced check
• performance of account or handling
• experience

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Checking with Banks

• Money market placement or investment
• type of placement or investment
• date of opening maturity
• amount of placement
• Credit or loan account
• type of credit accommodation
• date granted maturity
• collateral
• present balance
• payment record

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Checking with Other Suppliers or Trade Checking

• Credit limit/term
• Collateral
• Client since when
• Products purchased
• Average monthly purchase
• Outstanding obligation
• Payment habit
• Record of returned check

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Checking with the Court

• Place of business or residence
• Municipal regional trial courts
• Civil or criminal cases filed against
  the
• customer, corporation major stockholders
• of the corporation
• case number date filed
• name of defendant name of plaintiff
• nature of case sala filed
• Status of the case

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Thank you for listening!